Proof of Concept

When Bob Swanson and Herb Boyer founded Genentech in 1976, their goal was audacious: to create a business based on manipulating the genes of microorganisms to produce vital new medicines—a process that later came to be known as “biotechnology.” To do that, they faced a challenge common to startups around the world—they needed to raise money. They didn’t have much to show investors; they were hopeful that the fledgling technology of chemically synthesized DNA would make it possible to create full-length artificial genes from that DNA, insert them into bacteria, and program them to churn out useful hormones. But they had no proof that it could be done, and no commercial product in the works.

But Swanson had a product clearly in mind: insulin. As a businessman, he’d realized that a market for insulin already existed, and that the demand for the animal-derived drug was rapidly exceeding supply. He wanted to convince investors that Genentech could bioengineer human insulin and license it to an established pharmaceutical company for clinical trials. That early success would give the new company something to build on.

I fought [cloning somatostatin] like the devil...if you are going to go for something, go for the real thing.

At that point, Genentech didn’t even have a laboratory facility. Boyer called Arthur Riggs and Keiichi Itakura, Southern California scientists at City of Hope National Medical Center who had collaborated with him on cloning chemically synthesized DNA, to see if they wanted to get on board with a project to genetically engineer human insulin. Riggs was interested, but he believed that insulin, with its double chain of 51 amino acids, would be too ambitious a target for Genentech’s first “proof-of-concept” experiment.

He suggested trying somatostatin instead—a small hormone with only 14 amino acids—which would be considerably easier. The National Institutes of Health (NIH) had just rejected his team’s proposal to do just that experiment. They called it an “academic exercise” with no practical merit, but Riggs believed it was an important and necessary first step.

Boyer quickly agreed that it made sense to try somatostatin first in order to show investors that the technology could work. But Swanson adamantly disagreed. He didn’t want to go after an obscure hormone with no clinical application or market potential. “I fought that like the devil,” he later said. “If you are going to go for something, go for the real thing.”

Illustration: Andy Warner

It was the first time Swanson and Boyer had butted heads on a fundamental business decision, which, for a fledgling company without any products and limited funding, can be disastrous. Boyer knew that by starting smaller and proving their theories could work, they’d be able to tackle larger projects thereafter. Finally, the scientists managed to convince Swanson—who knew the company needed more funding, fast—that synthesizing somatostatin could be achieved much faster, with a higher chance of success.

It was a very scary time, when you saw money and your career and reputation going down the tubes.

The team, along with a new Italian post-doctorate named Roberto Crea, and Parkash Jhurani immediately began work on the project. Nothing like this had ever been done before, and there were complications every step of the way. First they had to construct an artificial gene by stitching together DNA fragments that encoded for the amino acid sequence of somatostatin. They opened up E. coli bacteria, and spliced the gene into one of its modified plasmids—small rings of genetic material—combining DNA from two organisms, making “recombinant DNA.” Finally, they had to reinsert the plasmids into the bacterium, which, they hoped, would then divide and create new DNA—and ultimately express somatostatin.

When the moment came to check whether the new process had worked, there was…nothing. “I was chewing on my heart,” Swanson later said, “It was a very scary time, when you saw money and your career and reputation going down the tubes.”

But the scientists, used to setbacks, tried again.

They realized that the bacteria were gobbling up the very small somatostatin protein, so they attached it to a larger protein, which they could clip off later. This time, they succeeded. The bacteria didn’t reject the synthetic genes, but instead began churning out foreign proteins using their own cellular processes. It was the first confirmation that the recombinant DNA technology could be used to make human proteins and it opened doors, not only to funding, but to unlimited scientific possibilities.1

For Genentech, somatostatin was an important first example of science leading business which set a precedent in the company ever after. While somatostatin never became a marketable product, it was the scientific proof Swanson needed when he announced his first research results to private investors in April of 1978. The two-year-old startup had accomplished its first research goal and the first commercial demonstration of their new biotechnology. At the same time, their successful experiment was the first step in a scientific revolution.

Title photo: Several members of the team celebrating the successful somatostatin experiment, City of Hope, 1977. Back row: Art Riggs, Herb Boyer, Keiichi Itakura, Tadaaki Hirose. Front row: Lillian Shih, Eleanor Directo, Bob Swanson, Paco Bolivar. Photo courtesy of Life Sciences at CHF.

Quotes from Robert A. Swanson, "Co-founder, CEO, and Chairman of Genentech, Inc., 1976-1996," Regional Oral History Office, The Bancroft Library, University of California, Berkeley.

1 K Itakura, T Hirose, R Crea, AD Riggs, HL Heyneker, F Bolivar and HW Boyer. Expression in Escherichia coli of a chemically synthesized gene for the hormone somatostatin. Science. Dec 1977; Vol. 198, Issue 4321; 1056-1063. DOI: 10.1126/science.412251.